Eastman Kodak filed for bankruptcy protection today, but said it will rebuild …

Eastman Kodak, after 120 years in business, filed for Chapter 11 bankruptcy protection today. It may not be surprising, given the way today's digital technologies are making photographic film a relic. But Kodak says it has a plan to rebuild, based heavily both on its own patent portfolio and its own digital technologies.

Kodak has sued the likes of Apple, HTC, Research In Motion, and Samsung, mainly over the use of how smartphones use and send digital images. The patent portfolio is a big part of Kodak's plans to "complete its transformation," as the company said in a statement today.

“Chapter 11 gives us the best opportunities to maximize the value in two critical parts of our technology portfolio: our digital capture patents, which are essential for a wide range of mobile and other consumer electronic devices that capture digital images and have generated over $3 billion of licensing revenues since 2003," Kodak CEO Antonio Perez said in a statement. He also touted Kodak's "pioneering investments in digital and materials deposition technologies," which account for 75 percent of the company's digital revenue.

Since 2003, Kodak has closed 13 manufacturing plants and 130 processing labs, and reduced its workforce by 47,000 people. But the company is obtaining $950 million in credit from Citigroup and said it will be able to continue to pay employee wages and benefits, and continue customer programs during bankruptcy. Kodak said it hopes to emerge from Chapter 11 as a "lean, world-class, digital imaging and materials science company.”

42 Reader Comments

$3,000,000,000+ in revenue from patent licensing alone (over 8 years)? I'd say this bankruptcy was avoidable, most companies would love to have $375,000,000 average revenue from patent licensing alone, even if their sales did go down the drain!

My first thought was "Great, transforming from manufacturer to patent troll." But then I realized that they actually did the work and the r&d. So transforming from manufacturing to r&d house? Are they going to continue to innovate and contribute, or just rest on theory laurels, I mean patents, now?

My first thought was "Great, transforming from manufacturer to patent troll." But then I realized that they actually did the work and the r&d. So transforming from manufacturing to r&d house? Are they going to continue to innovate and contribute, or just rest on theory laurels, I mean patents, now?

Except how much of that portfolio is valid in the current market? The whole problem is that their R&D focus was not on today. Even their current litigation is sketchy on that front, since it hinges on software patents and config files, not hard R&D.

Chapter patent troll bankruptcy? I used to be a fan of Kodak. But you know who blew off digital cameras initially? Kodak. You dropped the ball. You never even tried to pick it up. Never tried to capitalize your huge goodwill and brand name.

So fuck you very much, I'll happily give my money to other people instead.

Having worked in retail selling digital cameras through the film->digital transition (high school/college jobs and hobby) and being a photog fan in general, I can say that Kodak brought this on themselves.

The only reason this didn't happen sooner was their name/brand recognition. For years I tried to convince people to buy just about anything but a Kodak because they weren't getting their money's worth with those purchases, those efforts usually fell on deaf ears though since "Uncle Bob" told them its what they wanted.

Kodak tried to cater to the soccer mom/grandma/loyal base instead of building quality products that would appeal to a wider audience and expand the market. Their "Easyshare" shit was anything but, and my coworkers and I usually referred to them as paperweights or doorstops amongst ourselves.

They had the opportunity to destroy the market in the early years, but they basically handed it to the likes of Fuji (at the time), Sony, Nikon, and Canon. Not that I care much though as those companies picked up the ball and ran with it, leaving Kodak in the dust.

Patents on their physical processes don't bother me. Patents on how smartphones use and send digital images just falls back into stupid software patents territory. I'm pretty sure no one looked at Kodak's research before programming solutions to deal with digital images, making these "obvious to the industry" and unpatentable. If companies did actually rip off Kodak research, then maybe they have a case.

Having worked in retail selling digital cameras through the film->digital transition (high school/college jobs and hobby) and being a photog fan in general, I can say that Kodak brought this on themselves.

Same here. I was in retail during the whole explosion of digital cameras at the end of the the 90s and start of the 00s. Kodak products were focused on trying to extend their whole old model into the old system, and the products were just awful. Much like Sony's ill-fated decision to move into proprietary stuff, Kodak focused on docks, dongles, and locked-in software and printers.

The entire time that was happening, consumers and other companies were understanding that the world was changing and becoming more connected. And Kodak fought that while their products languished on shelves. Back then, those things didn't sell at all compared to Pentax, Vivitar, or even Sony, because you had a camera that was on the expensive side already, and then another hundred dollars worth of "parts" to make it do the things that others did easily.

I don't understand why a company can declare bankruptcy and retain their patents to troll (yes, troll - they created the technology, maybe, but they are obviously no longer using it). Don't non-"corporate persons" normally lose all their belongings to the bank?

Same here. I was in retail during the whole explosion of digital cameras at the end of the the 90s and start of the 00s. Kodak products were focused on trying to extend their whole old model into the old system, and the products were just awful. Much like Sony's ill-fated decision to move into proprietary stuff, Kodak focused on docks, dongles, and locked-in software and printers.

The entire time that was happening, consumers and other companies were understanding that the world was changing and becoming more connected. And Kodak fought that while their products languished on shelves. Back then, those things didn't sell at all compared to Pentax, Vivitar, or even Sony, because you had a camera that was on the expensive side already, and then another hundred dollars worth of "parts" to make it do the things that others did easily.

It seems to be the circle of life for many companies. They start off hugely successful initially, but then the MBA troglodytes come in and out go the long-term goals, and in go the short term profits. Kodak is just the latest in a long line.

I don't understand why a company can declare bankruptcy and retain their patents to troll (yes, troll - they created the technology, maybe, but they are obviously no longer using it). Don't non-"corporate persons" normally lose all their belongings to the bank?

Public domain, I say!

When Kodak files for bankruptcy, they lose all their assets to their creditors. The public domain is not a creditor. When a person files for bankruptcy, they lose all losable assets to their creditors, like the bank or a credit card company, etc. Bankruptcy does NOT equal going out of business. It means restructuring. It means the balance sheet of an entity will be altered. Rarely, it does actually mean "going out of business" by means of liquidation, but almost always, like in this case with Kodak, it just means a restructuring of the balance sheet.

What doesn't make sense to me is that Kodak expects inkjets to save them? Really? With just about everything headed towards laser printing (if printing at all) nowadays? Considering they were the ones who developed (or an early pioneer) in digital photography, why didn't they go into areas that would have been a natural? If they'd played their cards right, a Kodak scanner or Kodak copier would be the thing to beat. Instead, they sat on their laurels until the laurels ran out.

What doesn't make sense to me is that Kodak expects inkjets to save them? Really? With just about everything headed towards laser printing (if printing at all) nowadays? Considering they were the ones who developed (or an early pioneer) in digital photography, why didn't they go into areas that would have been a natural? If they'd played their cards right, a Kodak scanner or Kodak copier would be the thing to beat. Instead, they sat on their laurels until the laurels ran out.

This may answer some of your questions:

"Another reason why Kodak was slow to change was that its executives “suffered from a mentality of perfect products, rather than the high-tech mindset of make it, launch it, fix it,” says Rosabeth Moss Kanter of Harvard Business School, who has advised the firm. Working in a one-company town did not help, either. Kodak’s bosses in Rochester seldom heard much criticism of the firm, she says. Even when Kodak decided to diversify, it took years to make its first acquisition. It created a widely admired venture-capital arm, but never made big enough bets to create breakthroughs, says Ms Kanter."

What doesn't make sense to me is that Kodak expects inkjets to save them?

makes sense when you take a step back.

the company thinks ink jets will save them and they are going bankrupt.those two thoughts go hand in hand.

The over 50 demographic still has this odd fetish with printing pictures they find on the internet - even when they own digital photo frames. It's like the people that spend all day sending you chain joke emails - there are lots of people who take pride in not having a clue.

also from your economist link "The latest, Antonio Perez, who took charge in 2005, has focused on turning the firm into a powerhouse of digital printing (something he learnt about at his old firm, Hewlett-Packard, and which Kodak still insists will save it)"

Kodak made their money with film and processing, not hardware, other than those cheap Instamatics.

Not only could they not get into digicams, their consumable business was destroyed. No need for film, photographic paper, film processing, etc. They tried printers but again, people can buy Canons, Epsons, HPs, etc.

Maybe if they had had hardware as part of their brand identity during all those decades but they were happy to be on the consumables side of photography and let the Japanese and German manufacturers make the cameras and lenses.

"Another reason why Kodak was slow to change was that its executives “suffered from a mentality of perfect products, rather than the high-tech mindset of make it, launch it, fix it,”

Pfft, Apple conclusively demonstrates the exact opposite is true.

Releasing a sub-par product is fraught with peril. First of all, your marketing people are going to polish any turd you give them. So if it is a turd, the public will very quickly reduce your street cred. And if you do this a couple of times in a row, your brand becomes a negative value.

Companies who's brand is "cheap crap", like Walmart, can get away with this. Company's who sell premium products? Kiss of death.

TurboPascal wrote:

says Rosabeth Moss Kanter of Harvard Business School, who has advised the firm.

I don't understand why a company can declare bankruptcy and retain their patents

Chapter 11 is reorganization, not liquidation. They get to cancel many of their existing contracts and have to work out a deal with their creditors and present it to a judge for approval. If they can't do that they may move to chapter 7 (liquidation) where the creditors divide up the assets (e.g., IP, real estate, etc.).

Kodak made their money with film and processing, not hardware, other than those cheap Instamatics.

Not only could they not get into digicams, their consumable business was destroyed. No need for film, photographic paper, film processing, etc. They tried printers but again, people can buy Canons, Epsons, HPs, etc.

Maybe if they had had hardware as part of their brand identity during all those decades but they were happy to be on the consumables side of photography and let the Japanese and German manufacturers make the cameras and lenses.

Sad but Kodak is the buggy whip company of the digital era.

There was a time, when Kodak supplied the sensors to Canon and Olympus. they did not evolve and continue to create good sensors and Canon decided to create its own and so did Olympus. Sony supplies the sensors to Nikon.

Kodak could have been the "Intel" of the camera world, but they did not invest in it correctly -- they pretty much at one point abandoned it - then came back with their own cameras -- but always far behind. They had a great idea with photo frames as well, but once again, did not understand the market and had mediocre products. Over time, they simply lost their brand

Even in printing, there was a time when Kodak supplied to Epson and even the print engine -- once again, they let it slide and Epson did their own thing. Today, they are trying to keep printing presses in the high volume printers, problem is, HP, Agfa and few other own that space and print media will slowly over time will become smaller

$3,000,000,000+ in revenue from patent licensing alone (over 8 years)? I'd say this bankruptcy was avoidable, most companies would love to have $375,000,000 average revenue from patent licensing alone, even if their sales did go down the drain!

Revenue isn't the same a profits. If you only had a few dozen people working at a few offices, that would be awesome. But the expenses of running labs and manufacturing, like Kodak does, means a lot more money goes out.

"Another reason why Kodak was slow to change was that its executives “suffered from a mentality of perfect products, rather than the high-tech mindset of make it, launch it, fix it,”

Pfft, Apple conclusively demonstrates the exact opposite is true.

Releasing a sub-par product is fraught with peril. First of all, your marketing people are going to polish any turd you give them. So if it is a turd, the public will very quickly reduce your street cred. And if you do this a couple of times in a row, your brand becomes a negative value.

There's a difference between speed and quality. A turd that's polished or unpolished is still a turd, Kodak spent too long on products that may or may not have been great, but the important bit is that they were always late to market, which is bad no matter how good your product is.

Apple certainly goes with 'make it, launch it, fix it', although they skip out on the latter sometimes. They always try to be first to market rather than perfect a product and it often shows with their infamous first gen product reputation. First gen laptops have chronic overheating problems in products thanks to new and funky designs being a little ahead of their time. Powerbooks had the infamous "white spot" issue on early models, first gen iPod Nano's scratched way too easily. There's no excessive polish going on at Apple, there is an excellent design team and less worry about keeping cost down.

I love Apple to death, have done for years, but most of the Apple old timers I know know that buying a first gen Apple product is generally a bad idea. But it's not an image that has stuck, probably thanks to excessive marketing.

"Another reason why Kodak was slow to change was that its executives “suffered from a mentality of perfect products, rather than the high-tech mindset of make it, launch it, fix it,”

Pfft, Apple conclusively demonstrates the exact opposite is true.

Releasing a sub-par product is fraught with peril. First of all, your marketing people are going to polish any turd you give them. So if it is a turd, the public will very quickly reduce your street cred. And if you do this a couple of times in a row, your brand becomes a negative value.

Companies who's brand is "cheap crap", like Walmart, can get away with this. Company's who sell premium products? Kiss of death.

TurboPascal wrote:

says Rosabeth Moss Kanter of Harvard Business School, who has advised the firm.

… right into bankruptcy. Well done Mz. Kanter.

I had forgotten, Apple has never made a flawed product nor are there any viruses that can infect its OS. Every product innovates leaps and bounds over its predecessor and they never iterate -- they have never had a failed product -- never a phone without an antenna problem in their phones, the iPod never had battery and screen problems and everyone is in love with new Final Cut Pro X --- Oh wait!!!

"Another reason why Kodak was slow to change was that its executives “suffered from a mentality of perfect products, rather than the high-tech mindset of make it, launch it, fix it,”

Pfft, Apple conclusively demonstrates the exact opposite is true.

Releasing a sub-par product is fraught with peril. First of all, your marketing people are going to polish any turd you give them. So if it is a turd, the public will very quickly reduce your street cred. And if you do this a couple of times in a row, your brand becomes a negative value.

Companies who's brand is "cheap crap", like Walmart, can get away with this. Company's who sell premium products? Kiss of death.

TurboPascal wrote:

says Rosabeth Moss Kanter of Harvard Business School, who has advised the firm.

… right into bankruptcy. Well done Mz. Kanter.

I had forgotten, Apple has never made a flawed product nor are there any viruses that can infect its OS. Every product innovates leaps and bounds over its predecessor and they never iterate -- they have never had a failed product -- never a phone without an antenna problem in their phones, the iPod never had battery and screen problems and everyone is in love with new Final Cut Pro X --- Oh wait!!!

When Kodak files for bankruptcy, they lose all their assets to their creditors.

Patents = assets.

Yes, obviously.

Quote:

eeks wrote:

The public domain is not a creditor.

Sure it is. We, the people, loaned you the right to a monopoly on your works..?

Conceptually, that's one way to look at it. But that's not how the bankruptcy laws look at it; unless you're a creditor for the purposes of bankruptcy, you won't have any entitlement to, or say in the disposition of, a debtor's assets.

If Kodak reorganizes and emerges from chapter 11, it will retain some or all of its patent portfolio to the extent that those assets were not sold during the chapter 11 case or pursuant to a confirmed plan of reorganization. Creditors will then receive cash distributions, equity in the new, post-chapter 11 Kodak, or some combination of both. To the extent that creditors end up with equity, they will "own" Kodak's assets (including any patents retained by New Kodak). If Kodak does not reorganize, one of two outcomes will result: (1) Kodak's operating business(es) will be sold during the chapter 11 case (along with substantially all of their desirable assets), pursuant to an asset sale, to one or more buyers or (2) Kodak will go into a straight liquidation through which all of its assets will be sold piecemeal through a bankruptcy auction. The former is not so different from reorganization because Kodak's business operation will still exist, albeit in the hands of a third party buyer. In both of these cases, creditors will receive the cash proceeds and the buyer will have any assets included in the purchase agreements.

fishsandwich wrote:

As far as bankruptcy goes, can an individual file for chapter 11? I thought that only applies to companies.

No, chapter 11 is only for business reorganizations. Many of chapter 11's provisions are specific to business operations and would not make sense when applied to individuals anyway.

Both companies and individuals can file for liquidation pursuant to chapter 7. This is what most individuals filing for bankruptcy do -- there are certain exemptions provided for individuals that allow certain assets (such as a personal residence) to be shielded in whole or in part from creditors.

Individuals can filed for bankruptcy protection pursuant to chapter 13, however, which is somewhat analogous to chapter 11 reorganization. It's a bit off topic so I won't derail further, but you can read a bit about how it works on Wikipedia. There are several other chapters of the U.S. Bankruptcy Code that deal with other specialized circumstances as well: chapter 9 (municipal debtors), chapter 12 (family farmer reorganizations), and chapter 15 (foreign debtors and international insolvencies).

$3,000,000,000+ in revenue from patent licensing alone (over 8 years)? I'd say this bankruptcy was avoidable, most companies would love to have $375,000,000 average revenue from patent licensing alone, even if their sales did go down the drain!

Revenue isn't the same a profits. If you only had a few dozen people working at a few offices, that would be awesome. But the expenses of running labs and manufacturing, like Kodak does, means a lot more money goes out.

True, but $375m a year should allow all the restructuring you need, and should be enough to float some manufacturing. I was trying to get at the $375m should be enough that they could have seen the massive drain their manufacturing was having and taken greater steps to avoid filing Chapter 11. They clearly had income, and clearly the manufacturing was draining them dry.

Of course, what do I know. KMart filed for Chapter 11, and 2 months later they bought Sears. How'd that work? (I don't remember the exact time scales involved, but I do remember wondering how it was possible.)

I don't understand why a company can declare bankruptcy and retain their patents

Chapter 11 is reorganization, not liquidation. They get to cancel many of their existing contracts and have to work out a deal with their creditors and present it to a judge for approval. If they can't do that they may move to chapter 7 (liquidation) where the creditors divide up the assets (e.g., IP, real estate, etc.).

This smells worse than the whole implosion of Chrysler and Chevy. Look at the facts in both cases:

1. The companies clung to old ideals and refused to innovate.2. The implosions could have been predicted a decade prior, yet the signs were ignored by the CEOs.

Now, under the cloak of bankruptcy, Kodak is going to rapidly gut itself of most of those old, crusty ideals, and many hard working employees. They will be replaced in favor of leaner business practices (i.e. patent trolling), all while under the command of the bastards that allowed the company to slip in the first place, and who do not care what happens as long as they keep their company cars and lavish pensions.